Ten top tips for investors in 2010
Posted on 15 December 2009 with no comments from readers
1. Stay out of all equities. This is a monstrous valuation bubble driven up by zero interest rates. Rates have to go up, and stock markets down. Markets will correct when something reminds them that this is the future outlook.
2. The dollar rally has further to go, and the dollar will go higher as equities fall, so keep to cash and treasuries until the dollar tops out.
3. No need to diversify into foreign currencies in 2010, except for dollar-linked currencies like the UAE dirham that offer higher interest rates and an explicit government guarantee on all deposits.
4. Buy gold and silver on price weakness when the US dollar rally tops out, and oil stocks.
5. Beware emerging markets like Brazil, Russia, China and India. What has gone up in a hurry will crash in a heap.
6. This will be the ‘Year of the Short’ so, if you want to play the market look to options or short ETFs.
7. Real estate is locked in a downtrend. Interest rates are very low, and real estate only bottoms out when rates are high.
8. Stay liquid for the lifetime buying opportunities that will follow a big crash. Then buy when Warren Buffett says.
9. Do remember to save some of what you earn for future investment opportunities which otherwise tend to occur when you have no savings.
10. Remember that in an era of low interest rates the value of a job is considerable because it would take a much higher capital sum to earn the same in interest. Look after your job.
no Comments posted by readers:
The markets do look to be warmimg up for a shake out. I arranged my pension back in October into cash as I thought the FTSE had topped back then, so I am still waiting in the side lines for a correction.
My only concern is my cash savings are in sterling. As your are an expat would you hold that currency or would you spread it arround a bit say into US dollars, Canadian and Swiss Francs. After all if I decide to invest in property there may only be real falls as opposed to nominal falls thereby my purchasing power will be diminished
Ed Note: I would not hold any sterling – US dollars would be much better. Post election UK will see a big devaluation, if not before. Gold and silver will also protect you but be more volatile.
No investment is totally safe, but for the next few years at least, I don’t see how you can go wrong with the two oil supermajors that usually try to pay around a 5% dividend. Giant companies like BP and Shell don’t disappear overnight, but may eventually be frozen out of much of the world by resource nationalism. If inflation takes off, so will the oil price. If anyone knows of a cheaper energy source than oil and gas, I want to invest in that! I’ll be buying some oil & gas next year, since Mother Nature isn’t making a whole lot more of it anytime soon, and more cars are born every day. But, I will buy on a dip.
Joesph, if you believe the FTSE 100 is in for a correction (has been going nowhere for awhile, at least a 50% bet for a correction) you might want to profit on the fall as well as pick up bargains at the bottom. Have a look at a short ETF like SUK2 which gives a double up on a FTSE 100 fall. Would be interested in Peter JC’s opinion on such a fund.
Ed Note: Yes interesting – EDZ the short emerging markets ETF is my favorite at the moment – I just don’t believe China is more than an investment bubble right now. But be careful as these corrections can take ages to happen and short ETFs tend to wither away. That said many short ETFs look bombed out and should rally very strongly in a correction.
Hi Peter,
thanks for the ETF tip of EDZ – looks like it has little downsize risk at the moment given it’s last 6 months price action. Another ETF I have been looking at is: ETFS Leveraged Grains DJ-UBSCISM (LGRA)- Reports of crop failures around the world could cause a spike for grains in 2010…worth a look at least.
Do you ever read Dr Jim Willie on gold-eagle.com?
I have recently signed up to his newsletter – he forcast the Dubai bond default several months back. Worth the subscription. His next pick for default at the moment is Greece.
Merry Christmas.
Peter:
Your “Top 10 Picks” are certainly noteworthy of very serious consideration, IMO.
Comment on Leverage:
Several of your readers are enthusiastic about leveraged ETFs. To them I will issue a word of extreme caution; the algorithms used in these leveraged ETFs replicate the price movement, but if the daily/ weekly price movement is zig-zag, these ETFs are a very, very poor investment, and the only folks who gain are the custodians of the ETF.
If You Like Grains:
If you like grains as an investment (and I do!), then consider a different, and non-leveraged ETF, such as GRU. Jim Rogers also has some non leveraged ETNs.
Disclosure: I own a lot of GRU